Correlation Between Nextera Energy and Connecticut Light

Can any of the company-specific risk be diversified away by investing in both Nextera Energy and Connecticut Light at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Nextera Energy and Connecticut Light into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Nextera Energy and The Connecticut Light, you can compare the effects of market volatilities on Nextera Energy and Connecticut Light and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Nextera Energy with a short position of Connecticut Light. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nextera Energy and Connecticut Light.

Diversification Opportunities for Nextera Energy and Connecticut Light

0.42

Correlation Coefficient

Nextera Energy  Connecticut Light

Very weak diversification

The 3 months correlation between Nextera and Connecticut is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Nextera Energy and The Connecticut Light in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Connecticut Light and Nextera Energy is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Nextera Energy are associated (or correlated) with Connecticut Light. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Connecticut Light has no effect on the direction of Nextera Energy i.e., Nextera Energy and Connecticut Light go up and down completely randomly.

Pair Corralation between Nextera Energy and Connecticut Light

Assuming the 90 days trading horizon Nextera Energy is expected to generate 0.82 times more return on investment than Connecticut Light. However, Nextera Energy is 1.22 times less risky than Connecticut Light. It trades about -0.05 of its potential returns per unit of risk. The Connecticut Light is currently generating about -0.1 per unit of risk. If you would invest  4,539  in Nextera Energy on October 26, 2024 and sell it today you would lose (314.00) from holding Nextera Energy or give up 6.92% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.33%
Values	Daily Returns

Nextera Energy  vs.  The Connecticut Light

Nextera Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nextera Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical and fundamental indicators, Nextera Energy is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Connecticut Light

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Connecticut Light has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unfluctuating performance in the last few months, the Stock's technical indicators remain relatively invariable which may send shares a bit higher in February 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Nextera Energy and Connecticut Light

The main advantage of trading using opposite Nextera Energy and Connecticut Light positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nextera Energy position performs unexpectedly, Connecticut Light can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Connecticut Light will offset losses from the drop in Connecticut Light's long position.

The idea behind Nextera Energy and The Connecticut Light pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.